[00:00:00] Speaker 01: Phase number 22-1166, East Texas Electric Cooperative Inc. [00:00:06] Speaker 01: et al. [00:00:06] Speaker 01: petitioners versus Federal Energy Regulatory Commission. [00:00:10] Speaker 01: Mr. Rose for the petitioners, Mr. Kennedy for the respondent, Mr. Kaiser for the respondent intervener. [00:00:34] Speaker 05: whenever you're ready. [00:00:36] Speaker 06: May it please the court. [00:00:38] Speaker 06: Four issues before this court earned arbitrary and capricious per-approval APUS manipulation that's forming a transmission plan. [00:00:48] Speaker 06: Issue one is procedural, remaining issues, subsidy. [00:00:54] Speaker 06: Issue one, challenge period. [00:00:56] Speaker 06: That breaks down into two issues. [00:00:58] Speaker 06: What does the tariff protocol section five be, say, [00:01:03] Speaker 06: And two, what is for a precedent, say, of that. [00:01:07] Speaker 06: Let's turn to Kara. [00:01:08] Speaker 07: Can I ask you a question about that before you proceed? [00:01:11] Speaker 07: Even if there were some longstanding practice of backwards error correction, do you agree that that could be superseded by the terms of the protocol? [00:01:22] Speaker 06: The terms of the protocol has to itself be just and reasonable. [00:01:26] Speaker 06: Now, I appreciate that. [00:01:29] Speaker 06: This is not a contract. [00:01:31] Speaker 06: This is a tariff protocol. [00:01:33] Speaker 06: And tariff protocols are judged, whether they are just not parties. [00:01:39] Speaker 07: So you think that this case is determined by the protocol, Section 5D. [00:01:45] Speaker 07: And if Section 5D were contrary to a longstanding practice, if it chose to override a longstanding practice of backwards error correction, it could do that, correct? [00:01:57] Speaker 06: It can do that. [00:01:59] Speaker 07: So do we even need to think about what the longstanding practice is? [00:02:04] Speaker 07: Or do we just need to look at Section 5D and what it means? [00:02:08] Speaker 06: Well, the longstanding practice informs this court as to how Burt should be interpreting that character provision. [00:02:15] Speaker 05: I see. [00:02:17] Speaker 05: But on the other hand, you have not made [00:02:27] Speaker 05: enforcing time limits on this tariff process would be unlawful, would violate the Federal Power Act. [00:02:37] Speaker 05: Your only argument is based on what FERC has approved in other cases. [00:02:44] Speaker 05: That's correct. [00:02:47] Speaker 05: Which sort of puts an exclamation point on Judge Pan's question. [00:02:53] Speaker 06: And I'll explain exactly why that precedent FERC had is so important to interpret the tariff. [00:03:02] Speaker 06: First issue is, does the tariff protocol unambiguously bar backward error crash? [00:03:10] Speaker 05: Will that... Well, it's actually whether FERC could reasonably construe the protocol to do that. [00:03:16] Speaker 06: Well, you have to get past whether... [00:03:19] Speaker 06: language is ambiguous. [00:03:21] Speaker 06: If it is ambiguous, then you go to whether FERC's interpretation is reasonable. [00:03:25] Speaker 05: So if you're within the range of reasonable disagreement, FERC wins? [00:03:30] Speaker 06: No. [00:03:31] Speaker 06: It's not whatever FERC says. [00:03:34] Speaker 05: You don't think FERC has interpretive authority over tariff provisions? [00:03:38] Speaker 06: They have interpretive authority, but it has to be reasonable. [00:03:41] Speaker 06: And that Chevron type. [00:03:43] Speaker 05: If we're in the zone of reasonable disagreement, FERC's interpretive [00:03:49] Speaker 06: That is correct. [00:03:49] Speaker 06: And that kind of interpretation depends on looking at the text, structure, purpose, and history of the protocol. [00:04:00] Speaker 06: Turning to the issue of is the protocol itself unambiguous, looking at the AAP West Protocol Section 5D, it speaks of challenges to current annual updates, future annual updates. [00:04:16] Speaker 06: and doesn't say anything at all about previous annual updates. [00:04:21] Speaker 07: But weren't the previous, I'm sorry, but weren't the previous updates subject to Section 5D? [00:04:27] Speaker 06: Our claim that Section 5D says anything at all about previous annual updates. [00:04:33] Speaker 05: Here's the language. [00:04:35] Speaker 05: A given annual update. [00:04:37] Speaker 05: Yes. [00:04:38] Speaker 05: Which would seem to cover 2018 as well as 2019. [00:04:42] Speaker 06: No, it covers the annual update [00:04:47] Speaker 06: but in two thousand eighteen section fifty applied so i don't under that reading then you have to bring challenges to two thousand eighteen in two thousand eighteen the language itself talks about the language appreciate talking here all sections of section five d it is talking about [00:05:16] Speaker 06: You have an annual update. [00:05:18] Speaker 06: You make a challenge to that annual update. [00:05:20] Speaker 06: That does not prevent you from making other challenges that you missed in a second. [00:05:25] Speaker 07: But you should have made it into, under this provision, shouldn't you have made challenges to 2018, in 2018? [00:05:31] Speaker 06: No. [00:05:32] Speaker 06: That's not the right way to read the language. [00:05:35] Speaker 07: Why not? [00:05:36] Speaker 07: Because this applied in 2018. [00:05:37] Speaker 07: So you had a chance to challenge 2018 errors in 2018. [00:05:41] Speaker 06: Let me explain. [00:05:44] Speaker 06: There is language that would do that. [00:05:46] Speaker 06: You can find that in the Average in Kansas protocol. [00:05:49] Speaker 06: It said it was informative, it is informative, but not the reason for the thing. [00:05:54] Speaker 06: The Average in Kansas protocol. [00:05:55] Speaker 05: Let's just talk about this one. [00:05:57] Speaker 05: This does seem awfully clear. [00:05:59] Speaker 05: It talks about a given annual update with the indefinite article A and the adjective given. [00:06:06] Speaker 05: That doesn't mean [00:06:09] Speaker 05: the one and only annual update that is the most recent one under litigation. [00:06:17] Speaker 06: A annual update means there's going to be a whole series of annual updates. [00:06:21] Speaker 06: You know that in Japan. [00:06:23] Speaker 05: But this... And a given annual update would seem to refer to all of them. [00:06:29] Speaker 06: No. [00:06:30] Speaker 06: You want to get the series of annual updates. [00:06:32] Speaker 06: You'd use language like each annual update, which is what the AVERGEE protocol says. [00:06:39] Speaker 06: That's not here. [00:06:40] Speaker 06: That language is simply not here. [00:06:44] Speaker 06: So if the court believes that there is a logical possibility of interpreting this language to not address backwards error correction, then at the very least, the language is ambiguous. [00:07:00] Speaker 06: If the language is ambiguous, then this court looks to see if Burke's tariff interpretation is just reasonable. [00:07:07] Speaker 05: I'm sorry. [00:07:09] Speaker 06: I didn't hear you. [00:07:10] Speaker 06: Let me look to see whether Burke's tariff interpretation satisfies the arbitrary standard. [00:07:16] Speaker 07: I really want to understand your argument. [00:07:19] Speaker 07: So the language says failure to pursue an issue through a preliminary challenge or to lodge a formal challenge regarding any issue as to a given annual update shall bar pursuit of such issue with respect to that annual update. [00:07:37] Speaker 07: I don't understand your argument as to why you didn't have to bring up a challenge to the 2018 tariff in 2018 under this provision. [00:07:50] Speaker 06: In 2019, that annual update was the 2019 annual update. [00:07:55] Speaker 06: I understand that, but this also applied in 2018. [00:07:58] Speaker 07: So your chance to do that was in 2018. [00:08:01] Speaker 06: Only if you make that assumption. [00:08:03] Speaker 06: But that's not in the language itself. [00:08:05] Speaker 07: How is that an assumption? [00:08:07] Speaker 06: Because you are assuming that that annual update goes backwards. [00:08:12] Speaker 06: Where is that language? [00:08:13] Speaker 07: It says any issue as to a given annual update shall bar pursuit of such issue with respect to that annual update. [00:08:20] Speaker 07: Yes. [00:08:21] Speaker 07: So in 2018, any issue as to that annual update in 2018 should have been raised then. [00:08:27] Speaker 07: Failures pursued in 2018 shall bar pursuit of such issue. [00:08:31] Speaker 06: No. [00:08:32] Speaker 06: It doesn't apply. [00:08:34] Speaker 06: Why? [00:08:37] Speaker 06: You're dealing with, and the language is clear about this, you are dealing with a given annual update and then its implications for the next annual update. [00:08:45] Speaker 07: That's for 2019, but I'm saying you want to raise error correction from, for example, 2018. [00:08:51] Speaker 07: But in 2018, 5D applied. [00:08:54] Speaker 06: Yes, it did. [00:08:56] Speaker 06: And for 2018, whatever challenges we made, applied then. [00:09:00] Speaker 06: But you can always find errors later on and apply it backwards to 2018. [00:09:06] Speaker 07: I don't understand how the language allows that. [00:09:09] Speaker 06: Because it does not address backward error correction. [00:09:11] Speaker 06: It simply doesn't say that. [00:09:13] Speaker 06: There is language that can address backward error correction, but they didn't use that. [00:09:17] Speaker 02: Well, how does Section 205 and 206 of the Federal Power Act play into this then? [00:09:23] Speaker 06: Well, let me explain it this way. [00:09:28] Speaker 06: With stated rates, the utility must wait for the decision to change its rate. [00:09:34] Speaker 06: cost of service formula rate utility changes its rates, then the commission takes a backwards look to make sure that the final rate tracks the actual costs of the utility. [00:09:44] Speaker 06: There's no good reason to limit the backward error correction. [00:09:48] Speaker 06: That's a section 205 type of proceeding when you have a formal challenge. [00:09:53] Speaker 05: Why not? [00:09:54] Speaker 05: I mean, there are strong anti retroactivity principles built into the statute. [00:10:00] Speaker 05: That would be a five month period built into 205. [00:10:04] Speaker 06: That would be true for the formula rate, which is the formula itself, but it is not true for the data inputs. [00:10:12] Speaker 06: Those are never approved as final. [00:10:16] Speaker 06: You can always bring, and Burke will admit it, a 206 case with backwards error correction. [00:10:22] Speaker 05: And 206 has anti-retroactivity principles built into a refund. [00:10:29] Speaker 05: It's just very odd that for this little kind of process that's sort of in the gray area between 2005 and 2006, you can go back to the beginning of time when under either prong of the statute you can only go back so far. [00:10:51] Speaker 06: Well, it's not so high even according to FERC. [00:10:54] Speaker 06: Since the day is a fuel adjustment charge, [00:10:57] Speaker 06: FERC has explicitly allowed in case after case error correction and prudence challenges that go back to when the error first appeared and at whatever time the error or imprudence was discovered. [00:11:10] Speaker 07: Can you explain, maybe it's just my lack of familiarity with FERC, but why is this claim properly brought under 205 instead of 206? [00:11:18] Speaker 07: Because it seems to me to be a procedural overarching thing and not about specific things. [00:11:23] Speaker 06: We have a, there is a formal challenge process to a rate, and the formal challenge process is 205-like, because the utility has the burden of proof to justify its particular cost of service if they had an input. [00:11:40] Speaker 07: But the claim seems to be that there's a procedure going on about backwards error correction that you think is not fair and just. [00:11:49] Speaker 07: That is correct. [00:11:49] Speaker 07: Shouldn't that be brought under 206? [00:11:51] Speaker 06: No, that would be a challenge formula. [00:11:53] Speaker 06: You're challenging right under the protocols themselves to make a backward error correction. [00:11:59] Speaker 07: OK, so if we interpret the protocols to be unambiguous and to favor Perk's interpretation, if you wanted to challenge that, then you could bring it under 206. [00:12:13] Speaker 06: That's correct. [00:12:14] Speaker 07: OK. [00:12:15] Speaker 06: appreciate, however, that Burke's position, if they're right on Section 205, on Section 5D, that would apply to both 205 formal rate challenges and to 206 challenges. [00:12:32] Speaker 06: Oh. [00:12:32] Speaker 06: Yes. [00:12:32] Speaker 06: Why? [00:12:33] Speaker 06: For data input. [00:12:35] Speaker 06: Because it's barring backward error correction, which is what Burke would argue. [00:12:40] Speaker 06: It bars backward error correction for both kinds of challenges. [00:12:44] Speaker 06: Yet you have this extensive precedent that yes, you can make backwards error challenges under 206. [00:12:52] Speaker 06: You just wipe that away. [00:12:53] Speaker 07: So is it correct that all the precedents would be relevant to a challenge under 206 to say this is just not fair and just the way of doing this? [00:13:02] Speaker 06: Yes. [00:13:03] Speaker 07: But they're not really relevant under this 205 challenge because we're just interpreting what 5D means. [00:13:09] Speaker 06: If you decide that section 5D is unambiguous and barring backward error correction, then what is relevant is only that the 206 challenges seem to have gone away as well. [00:13:23] Speaker 07: And that's just not correct. [00:13:25] Speaker 07: So this would be a precedent that would govern a 206 challenge? [00:13:28] Speaker 07: Is that what you're saying? [00:13:29] Speaker 07: Why? [00:13:29] Speaker 06: Yes, this 5D protocol language is used throughout the industry based on the old MISO protocols. [00:13:36] Speaker 06: Big truck inquiry into the justness and reasonableness of how you do transmission in a formula. [00:13:42] Speaker 07: But that doesn't mean that you can't challenge it under 206. [00:13:47] Speaker 06: Does it? [00:13:47] Speaker 06: We could challenge the formula under 206. [00:13:51] Speaker 06: But the data input, we could never challenge again. [00:13:53] Speaker 07: But it wouldn't be a data input. [00:13:55] Speaker 06: Even under a 206. [00:13:57] Speaker 07: I'm sorry. [00:13:57] Speaker 07: I just want to make sure I understand this. [00:14:00] Speaker 07: If we think that 5D language is unambiguous, in this case under 205, my question was, can you then raise a challenge to this procedure under 206 by saying it's not fair and just? [00:14:15] Speaker 07: And I thought your answer was yes. [00:14:17] Speaker 07: But then you said that your 206 challenge would be governed [00:14:21] Speaker 07: by our reasoning in this 205 challenge, and I don't understand why. [00:14:25] Speaker 06: I'm distinguishing between a 206 challenge, the data input, errors in data input. [00:14:32] Speaker 07: But your 206 challenge would not be to data inputs, it would be on the procedure of backwards error correction being limited. [00:14:39] Speaker 06: That's the other aspect, yes. [00:14:40] Speaker 07: And that would not be governed by the 205 decision we make in this case. [00:14:44] Speaker 05: Correct. [00:14:45] Speaker 07: Okay, thank you. [00:14:47] Speaker 05: 206. [00:14:50] Speaker 05: FERC says parties have a degree of ability to limit backward-looking challenges under the tariff protocols, and they say that is not, that is okay if and only if 206 challenges are unlimited, correct? [00:15:16] Speaker 06: The 206 challenges to the formula rate, you can always, [00:15:20] Speaker 06: formula itself, and that you can always bring a challenge to the data inputs and get backward error correction for the data input. [00:15:31] Speaker 06: Challenges to successful challenges to the formula are prospective only. [00:15:43] Speaker 07: I thought challenges to the formula could be retroactive. [00:15:45] Speaker 07: That's the 206 challenge. [00:15:47] Speaker 06: No, if it's a challenge to the formula, and you win, that's perspective only. [00:15:52] Speaker 06: The data inputs are not part of the formula, but just data input, and that you get backward error correction. [00:16:01] Speaker 07: That was not my understanding of 206. [00:16:03] Speaker 05: I thought the backwards error correction. [00:16:04] Speaker 05: 205 and 206 both have within them challenges to rates, [00:16:11] Speaker 05: and to classifications practices and regulations affecting such rates. [00:16:15] Speaker 05: My understanding is all of this, all these protocols are implementing statutory language about classification, classifications affecting rates under 205. [00:16:34] Speaker 05: None of that addresses [00:16:37] Speaker 05: your ability to use 206 to challenge not only rates, but classifications affecting rates. [00:16:48] Speaker 06: I'm not sure what you mean by that. [00:16:50] Speaker 06: You're talking about Section 205? [00:16:53] Speaker 05: Talking about, yeah, whatever we would say in this case about the permissibility of this kind of time limit in the tariff protocol. [00:17:11] Speaker 05: The tariff protocol can require you to challenge the inputs year by year, correct? [00:17:21] Speaker 06: Yes, it specifically allows you to challenge each annual. [00:17:25] Speaker 05: Require you to do it year by year? [00:17:27] Speaker 06: Yes. [00:17:29] Speaker 06: Will they have to file it year by year? [00:17:33] Speaker 05: Yes. [00:17:33] Speaker 05: As a challenge to the classification affecting rates under Section 205? [00:17:37] Speaker 05: Yes. [00:17:40] Speaker 05: I guess I'm just not seeing why that bars you from invoking 206 to challenge the classification. [00:17:52] Speaker 06: If you read the language that it applies to all the bar challenges, all previous annual updates, that knocks out a section 206 challenge to the data input. [00:18:08] Speaker 06: And that's contrary to FERC precedent. [00:18:10] Speaker 07: But not if your 206 challenge is challenging the formula and the protocol as applied. [00:18:20] Speaker 07: So my understanding is, correct me if I'm wrong, you have challenged the application in this case, Section 5D, that protocol. [00:18:29] Speaker 07: If we decide that Section 5D is unambiguous and it means backwards error correction is allowed under Section 5D, [00:18:38] Speaker 07: you could go under 206 and say, I want to challenge the formula and the protocol, not the application of it, but what it is, and say it's not fair and just. [00:18:47] Speaker 07: And in that case, you could have a separate case that challenges not the application of it necessarily in Section 5D in this, or actually it is, not in this case, but generally speaking, the way we've interpreted is not fair and just, and so you want to overturn the protocol. [00:19:06] Speaker 07: And that would be under 206. [00:19:08] Speaker 07: And my understanding was that you could get backwards error correction under 206, because there are a lot of cases that seem to say that. [00:19:13] Speaker 07: But you're saying you couldn't get backwards error correction under 206? [00:19:16] Speaker 07: Because if in 206, you were able to get a holding that this provision, which we've held to be unambiguous, is not fair and just, you could then challenge the provision that way, and then you could get backwards error correction. [00:19:32] Speaker 07: Because the formula, as it was written and as we've interpreted it, was not fair and just. [00:19:37] Speaker 06: Is that correct? [00:19:39] Speaker 06: The change to the formula, that all proceeds as you describe it, would be prospective only. [00:19:47] Speaker 06: It would, okay. [00:19:48] Speaker 06: And then we could start making backward error correction arguments if we won that issue subsequently. [00:19:55] Speaker 06: Under 205? [00:19:56] Speaker 06: That's what we would win if we won on challenging protocol. [00:20:01] Speaker 07: If you succeeded in challenging the protocol under 206, then you would file backwards error correction under 205 based on the new interpretation of the protocol? [00:20:09] Speaker 06: Yes. [00:20:10] Speaker 06: It would be 205 formula challenges. [00:20:13] Speaker 07: OK, I see. [00:20:13] Speaker 07: Because we would have held in that instance that you could backwards correct. [00:20:17] Speaker 07: Because that was not fair and just. [00:20:18] Speaker 07: So you would then go under 205. [00:20:21] Speaker 05: I had the same question you did, and we found an opinion putting this stuff under 205. [00:20:26] Speaker 07: OK. [00:20:27] Speaker 05: What's happening here. [00:20:28] Speaker 05: Thank you. [00:20:32] Speaker 06: Is there any more questions? [00:20:34] Speaker 07: Not on this issue. [00:20:35] Speaker 06: Thank you. [00:20:35] Speaker 05: We'll give you rebuttal. [00:20:50] Speaker 03: Good morning, Your Honor. [00:20:51] Speaker 03: Robert Kennedy on behalf of the Commission. [00:20:53] Speaker 05: Can you just walk us through the mechanics of this? [00:20:57] Speaker 05: I mean, I look at 205 and 206 to see what I see. [00:21:04] Speaker 05: You all seem to conceptualize this process for challenging inputs on the backward end of a [00:21:17] Speaker 05: formula rate tariff as its own thing. [00:21:23] Speaker 05: We've said it implements 205. [00:21:25] Speaker 05: Feels like it's somewhere in the middle. [00:21:30] Speaker 05: I mean, you've heard the question, so help us out. [00:21:33] Speaker 03: I was gonna try and jump in and hopefully, for the waters. [00:21:36] Speaker 03: I think an initial question from you, Judge Pam, was sort of, are we talking about whether this provision is just and reasonable? [00:21:43] Speaker 03: And the answer is no, that's been decided. [00:21:45] Speaker 03: This is part of the, Section 5D is part of the filed rate. [00:21:49] Speaker 03: So cases like Seminole, the First Circuit Boston Edison case, and Oklahoma Gas, say the question in this case is just whether it applies and should it be enforced, not whether as a policy matter. [00:22:02] Speaker 03: If they wanted to change that, they would say the [00:22:06] Speaker 03: where protocols are unjust and unreasonable, they would file a complaint under section 206 and get the formula and the related protocols changed going forward. [00:22:15] Speaker 05: In this case- And if they did that, they could get limited retrospective relief through the refund period, within the refund period? [00:22:26] Speaker 05: Also- I mean, they couldn't go back as many years as they want. [00:22:29] Speaker 03: Well, to make things even more confusing. [00:22:32] Speaker 03: So just as to the protocol, that would be changed and whatever they change it to, that would govern the next annual update and whatever it says about going back under this paraphrase process, that would govern. [00:22:44] Speaker 03: In the cases where the commission is, where there is a section 206 complaint and the party wants to get relief, putting aside, there's no similar protocol language. [00:22:56] Speaker 03: But just in the abstract, the party says, this is 2023, [00:23:02] Speaker 03: There's been a, I discovered an error. [00:23:04] Speaker 03: It's affected the rate since 2020. [00:23:06] Speaker 03: They bring a complaint under section 206. [00:23:09] Speaker 03: What the commission has held there is that it can order retroactive relief. [00:23:13] Speaker 03: It's doing, and it's not bound by the time period in section 206, the refund time period, because it's here. [00:23:21] Speaker 03: It's using section 309. [00:23:25] Speaker 03: But again, that's not the case here. [00:23:28] Speaker 03: And the commission has made clear that this is a, [00:23:31] Speaker 03: If you want to go that route, you can. [00:23:33] Speaker 03: We're talking here about the tariff-based challenge procedure, and that has to be governed by what the procedures say. [00:23:40] Speaker 03: We believe the Commission's interpretation of 5D is consistent with the language. [00:23:44] Speaker 03: We talked a lot about the express language. [00:23:47] Speaker 03: I always think this falls right in. [00:23:49] Speaker 03: It's consistent with precedent and also policy. [00:23:51] Speaker 03: With respect to precedent, [00:23:54] Speaker 03: In the reply brief, the petitioners note that this is a copy of the protocols that were eventually developed in the Commission's Midwest ISO proceeding, which sort of kicked off an industry-wide review of these formula rate protocols. [00:24:10] Speaker 03: And in the reply, they say, oh, we relied on that. [00:24:13] Speaker 03: We adopted that precedent. [00:24:14] Speaker 03: Well, if you look at final compliance order in that case, it expressly addressed the sentence that we're fighting about here today. [00:24:21] Speaker 03: And there's a lot of Midwest ISO cases. [00:24:22] Speaker 03: So it's 150 FERC 61025. [00:24:26] Speaker 03: And if you look at paragraph 35, [00:24:30] Speaker 03: Some of the customers say, hey, we think we need to qualify this language more. [00:24:34] Speaker 03: It could be read as affecting our Section 206 rights. [00:24:38] Speaker 03: Paragraph 43, the transmission owners say, no, no. [00:24:42] Speaker 03: That language has nothing to do with Section 206. [00:24:44] Speaker 03: That's separate. [00:24:45] Speaker 03: All we're saying with this language is you can't use [00:24:47] Speaker 03: challenge process to challenge prior rate years. [00:24:50] Speaker 03: Paragraph 50, Commission accepts the language. [00:24:53] Speaker 03: It says Section 206 is a separate thing. [00:24:56] Speaker 03: What this language is doing is saying that interested parties can only use this challenge process for the current rate year. [00:25:04] Speaker 03: So the Commission's interpretation of Section 5D is consistent with that. [00:25:08] Speaker 03: And it's also consistent with policy. [00:25:10] Speaker 03: You know, it put in place this robust protocol process to [00:25:15] Speaker 03: impose transparency obligations on the transmission owners, discovery obligations, there's a robust exchange of information, but it also wants the customers to be engaged in the section limitations, Section 5G encourages that and also furthers the goal of rate certainty, but it does so without affecting their ability, if they want, to pursue input errors going back in time. [00:25:40] Speaker 03: Through 206. [00:25:41] Speaker 03: Correct, correct. [00:25:43] Speaker 03: I'm happy to talk about any of the other issues if you have questions about the coal or the [00:25:53] Speaker 05: On this first question, I had thought there were two parts to the question. [00:25:58] Speaker 05: One is, what does the tariff mean? [00:26:02] Speaker 05: And then the second is, did the agency adequately explain its decision to enforce the tariff limitation based on things it had said in other cases? [00:26:23] Speaker 05: I'm just wondering, Judge Pan suggested, maybe we don't even get to the second question if the tariff is unambiguous. [00:26:34] Speaker 05: If the tariff is unambiguous, it governs, unless it's inconsistent with the statute, and there's no statutory claim here. [00:26:42] Speaker 05: So that's the end of it. [00:26:44] Speaker 05: All we need to do is construe the tariff. [00:26:47] Speaker 05: unambiguously in your favor, and then end of Q1. [00:26:52] Speaker 03: I think that's correct. [00:26:53] Speaker 03: In paragraph 13 of the hearing order and elsewhere, the commission's made clear that this isn't a statutory issue. [00:26:58] Speaker 03: It's just a tariff-based issue. [00:27:01] Speaker 03: We think the language compels the result here, but we also think if there is any ambiguity, the commission's certainly reasonably. [00:27:14] Speaker 03: Just if I can for a moment on the, there's been a lot of talk about what the commission does in reviewing these formula rate filings and examining the inputs and what's permissible and what's not. [00:27:27] Speaker 03: Just to take a step back, the uniform system of accounts has 50, 100 something accounts that tells the utility [00:27:36] Speaker 03: This is where you put all your expenses. [00:27:38] Speaker 03: This is where you categorize your revenue. [00:27:40] Speaker 03: Those are the inputs. [00:27:41] Speaker 03: The formula rate takes those inputs and says, okay, we're gonna put these accounts in this bucket. [00:27:47] Speaker 03: That's what the utility can charge its customers. [00:27:49] Speaker 03: We're gonna take these accounts in this bucket. [00:27:51] Speaker 03: That's what the utility has to cover itself. [00:27:54] Speaker 03: So in examining the formula rate updates each year, the commission will make sure that the right costs are in the right account. [00:28:03] Speaker 03: It will also consider prudence challenges. [00:28:06] Speaker 03: Did you prudently incur those costs? [00:28:09] Speaker 03: But what it won't do is rearrange the buckets and say, oh, you don't think this account should be in the customer bucket. [00:28:16] Speaker 03: That has to be done. [00:28:17] Speaker 03: That's changing the formula rate. [00:28:18] Speaker 03: That has to be done under Section 206. [00:28:22] Speaker 03: Unless there's any questions from the court, I'll stop there. [00:28:29] Speaker 05: Thank you, Your Honors. [00:28:29] Speaker 05: Thank you. [00:28:30] Speaker 05: We appreciate it. [00:28:45] Speaker 05: Mr. Kaiser, and you might want to lower the podium. [00:28:57] Speaker 04: Please, the court. [00:28:57] Speaker 04: Yes, your honor. [00:28:59] Speaker 04: William Kaiser, our service corporation supporting [00:29:05] Speaker 04: I want to take a minute because there was a lot of discussion about Section 205 and 206 and I'm happy to answer questions on them, but I do, and I think Board Council did a really good job of kind of explaining the nuances and how they work in the formula rate process. [00:29:17] Speaker 04: But I think it's important to recognize that when the protocols, both the protocols and the formula rate itself, which template is, as FERC council was explaining, are submitted by the utility, they're done so under Section 205 of the Federal Power Act. [00:29:29] Speaker 04: And FERC does review and approve both. [00:29:32] Speaker 04: Once they're established, only then, once FERC finds them just and reasonable or approves them, then you can challenge them under Section 206. [00:29:39] Speaker 04: But once they're established, the only way you can challenge that, including Section 5D, would be under a Section 206 [00:29:46] Speaker 07: And during the establishment process, there's also an opportunity to, I guess, comment and oppose, for example, a section like 5D? [00:29:55] Speaker 04: Absolutely, yes. [00:29:56] Speaker 04: There's an opportunity for participants to intervene and raise challenges. [00:30:02] Speaker 04: And the commission will consider that and will issue an order kind of ruling on this. [00:30:08] Speaker 07: And that's what your friend was referring to in this MISO case, where there was a [00:30:16] Speaker 07: challenge that this was going to affect people's rights under 206, and there was a clarification that no, this is just a 205 thing. [00:30:22] Speaker 04: That is exactly right. [00:30:22] Speaker 04: And there's another case that we cite in our brief, which is one of our affiliates, American Electric Power East, where we have language in there limiting the ability [00:30:32] Speaker 04: not only similar language to here, where it sort of will limit the ability to go back after the annual update process is closed, we also have language in there limiting the ability to file a complaint under Section 206. [00:30:45] Speaker 04: We're trying to limit that. [00:30:46] Speaker 04: And the commission struck that and distinguished between the two. [00:30:49] Speaker 04: They said to repeat the language where you're limiting challenges, but you cannot limit rights under Section 206 because of statutory rights. [00:30:56] Speaker 04: What's the site to that? [00:30:59] Speaker 04: It's American Electric RE. [00:31:09] Speaker 04: Thank you. [00:31:10] Speaker 02: And then how does the 5C tariff addendum, that catch-all provision affect what you just mentioned with respect to going under 205 and then under 206? [00:31:26] Speaker 04: So what 5C does, 5C limits the types of challenges that can be raised during the formula challenge process. [00:31:35] Speaker 04: Because what happens is FERC approves the formula or the template. [00:31:39] Speaker 04: And as we've talked about, inputs each year are updated based on cost of the utility that flowed through that formula rate template. [00:31:46] Speaker 04: And 5C limits the types of things that you can raise during the challenge process. [00:31:50] Speaker 04: One of the things you can't do, as Council Member Burke explained, is you can't challenge the template itself. [00:31:56] Speaker 04: You can challenge the inputs, but not the template. [00:31:58] Speaker 05: I was wondering whether this challenge falls under 205 or 206. [00:32:07] Speaker 05: I was thinking 206, and then I... [00:32:10] Speaker 05: came across this opinion by Judge Williams, who was a great FERC expert, said, seems more accurately akin to a continuance of the 205 proceeding, because the annual update supplements the utility's initial 205 filing, which is simply a formula without the necessary inputs. [00:32:31] Speaker 05: Do you agree with that? [00:32:32] Speaker 04: Yes, yes. [00:32:33] Speaker 04: I think that's the Northern Virginia Electric Co-op. [00:32:35] Speaker 05: So this proceeding before us is just the backend [00:32:41] Speaker 05: It is a culminate, finishing up the cleanup on the tariff. [00:32:47] Speaker 04: I agree with that. [00:32:48] Speaker 04: I don't know that I would characterize it as a cleanup. [00:32:50] Speaker 04: I think it's a supplement to. [00:32:51] Speaker 04: Fair enough. [00:32:52] Speaker 04: With respect, I believe it is a supplement to the 205 process, right? [00:32:57] Speaker 04: And that's what happens is the. [00:32:59] Speaker 05: So you bear the burden of proof. [00:33:02] Speaker 04: That is absolutely right. [00:33:03] Speaker 04: For the annual update process, when the inputs are provided, they're posted publicly. [00:33:09] Speaker 04: If a challenge is raised, the burden then falls on the utility to justify the costs that have been challenged by interested parties. [00:33:15] Speaker 05: You bear the burden of justifying the formula on the front end, the inputs on the back end. [00:33:22] Speaker 05: That's all 205. [00:33:24] Speaker 05: That's correct. [00:33:25] Speaker 05: They can challenge under 206. [00:33:28] Speaker 05: They can make the fair and just argument for under 206 for going outside the refund period. [00:33:36] Speaker 05: So this is really all about who's going to bear the burden. [00:33:39] Speaker 04: In part, that's exactly right. [00:33:41] Speaker 04: It is about who's going to bear the burden of proven. [00:33:43] Speaker 04: If you think about the challenge process, and I know I'm out of time. [00:33:45] Speaker 04: If we have questions, we'll. [00:33:49] Speaker 04: So what I just want to say that if you think about the way the challenge process works, it's the way the formula rate process works. [00:33:58] Speaker 04: Once the challenge process is complete, it's no different than a 205 case, right? [00:34:04] Speaker 04: Once the commission approves a rate filed under Section 205 of the Federal Power Act, it determines that rate is just and reasonable, and it stays in place. [00:34:11] Speaker 04: And the only way to challenge that is under Section 205. [00:34:14] Speaker 04: The same concept logic would apply to the finality [00:34:19] Speaker 07: And are these invariably separate proceedings under 205 versus 206? [00:34:23] Speaker 07: Like you can't argue 205. [00:34:25] Speaker 07: And in the alternative, I'm challenging under 206 in one case. [00:34:28] Speaker 07: Is that correct? [00:34:31] Speaker 04: You could, I guess. [00:34:32] Speaker 04: You could try to raise a challenge under 206. [00:34:35] Speaker 04: You would bear the burden if you were going to raise 206 challenges. [00:34:39] Speaker 04: So if you filed one pleading raising a formal challenge and you file a complaint on top of that, you would bear the burden. [00:34:46] Speaker 04: So it would be a different type of pleading. [00:34:48] Speaker 04: You'd have to have more evidence, depending upon what the issues are. [00:34:51] Speaker 07: So practically speaking, you wouldn't do it in one pleading because it's different. [00:34:55] Speaker 07: Different standards, et cetera. [00:34:56] Speaker 04: I would say maybe you could. [00:34:58] Speaker 04: It's possible. [00:35:04] Speaker 07: Thank you. [00:35:07] Speaker 05: Thank you very much. [00:35:07] Speaker 05: Thank you. [00:35:20] Speaker ?: Back up. [00:35:22] Speaker 07: The podium is getting a workout this morning. [00:35:28] Speaker 06: I'd like to address two points. [00:35:30] Speaker 06: First of all, the citation to the MISO cases. [00:35:34] Speaker 06: As we explained in fair amount of detail in our brief, the case that has been cited to you is the case on rehearing. [00:35:41] Speaker 06: What was the issue that was before for our on rehearing? [00:35:46] Speaker 06: Customers did raise the backward error correction issue [00:35:49] Speaker 06: in the earlier days, but Burke didn't decide it. [00:35:52] Speaker 06: Burke instead decided to, quote, retain the requirement of the interest party to submit an informal challenge, that would be an preliminary challenge, in order to be raised any issue of the formal challenge. [00:36:06] Speaker 06: And then in paragraph 35 of the hearing, Burke summarized that argument and then agreed with it. [00:36:14] Speaker 06: claim that this has already been decided just isn't true. [00:36:18] Speaker 06: It's a new issue in this court in this particular case. [00:36:22] Speaker 06: Now, Section 5C actually applies to coal costs issue. [00:36:31] Speaker 06: Whatever the limitations there might be on customers as to what challenges they can bring, there is also a protocol, Section 5F, obligation [00:36:43] Speaker 06: part of the utility to justify its particular cost items. [00:36:49] Speaker 06: They can't do that if those cost items are not used and useful. [00:36:54] Speaker 06: Also an independent FERC obligation under section 205 to make sure the rates are just and reasonable. [00:37:00] Speaker 06: FERC can't do that if the costs are not used and useful. [00:37:08] Speaker 06: Thank you, Council. [00:37:10] Speaker 05: The case is submitted.